In Case You Missed It: Investing With Your Values

In this issue, more thinking on work and the minimum wage debate, Thomas Piketty and the scrutiny of wealth, and the role of social investment.

Must Reads: The Stanford Social Innovation Review in collaboration with The Bridgespan Group has an eight-week blog series on "achieving transformative scale." In the American Prospect, Harold Meyerson ties the diminishing labor movement to the shrinking of the middle class. The American Enterprise Institute's Sita Nataraj Slavov and Benjamin Ho try to look at how inequality is measured and where the data limitations are. **Editor's Note: Next week we will be sending out a survey to ask a few questions about your readership. We hope you will respond. Thanks so much for reading.-T

We believe that charitable organizations should be guided by the balanced approach of advancing their missions effectively while striving to pay wages that allow employees to provide adequately for their families, and we therefore support increasing the minimum wage, with some accommodations for nonprofit employers... While acknowledging the need to preserve the viability of critical programs upon which millions of Americans rely at a time when donations have been mostly stagnant, IS calls on its members and all charitable and philanthropic organizations to pledge to work towards paying a living wage to their workers whenever possible.

Taking on the minimum wage debate, the Washington Post's Polifact finds that a 40-hour work week at $10.10 an hour would lift about 46 percent of the households relying on the minimum wage out of poverty. Meanwhile, unemployed folks forced into part-time work are eligible to continue to receive prorated unemployment benefits via a worksharing program, but states aren't participating, reports Ylan Mui in the Washington Post:

[A] worksharing program in Germany is credited with helping that country avoid the spike in unemployment that plagued the United States and recover more quickly from recession. At one point, more than 1.4 million Germans were receiving worksharing benefits at 63,000 businesses. If it were as popular in America, more than 5 million employees would be taking advantage of the program, according to a recent paper by American Enterprise Institute economists Kevin Hassett and Michael Strain for the Center for Budget and Policy Priorities... The authors argue worksharing could be more effective than traditional layoffs for three reasons. First, the pain of an economic downturn is spread across a broader spectrum of workers, instead of being concentrated on the few who lose their jobs. That could help shore up demand because workers would feel less pressure to build their savings for fear of getting laid off.

Talkin About a Piketty Revolution

At Heron, we have been exploring the inequality debate and how much it matters in terms of moving people out of poverty. Check out this editorial cartoon from Steve Greenberg:

The gab fest over Thomas Piketty's book "Capital in the Twenty First Century" and the debate over rising wealth inequality has continued unabated, so here is another bundle of thought on the issue. The New York Times' Paul Krugman calls it "the Piketty panic" that has reduced many critics to name calling, and in TIME, Rana Foroohar calls him Marx 2.0 (subscription only). But in this interview with Piketty and Matthew Ygeslsias over at Vox, Piketty says his idea of taxing the wealthy would provide good data and help capitalism in the long run:

To me, one of the main purposes of the wealth tax is that it should produce more information on wealth. I think even a wealth tax with a minimal tax rate would be a way toward more financial transparency. A minimal registration tax on assets, a minimum wealth tax is a way that we can produce more information on wealth, and then we'll see what happens in terms of tax rate. After all, maybe we'll discover that the Forbes rankings are just completely wrong, and that the top of the wealth distribution is not rising as fast as what we thought and that we don't need such a high tax rate on wealth. I wouldn't mind. Right now, the lack of financial transparency makes it very difficult to have a quiet political conversation and democratic debate about these things. ...We ought to organize ourselves and do the best out of capitalism and the market economy which, at the end of the day, is a system that has a lot of merit. But we need to find a way that everyone can get to share in this process.

Many have tried to figure out why the rich are freaking out these days. Their wealth was saved from the financial panic, they are having a very excellent recovery, and they are poised to reap even greater gains going forward. Perhaps they are noticing that the dominant narratives about their role in society—avatars of success, job creators for the common good, innovators for social betterment, problem-solving philanthropists—are being replaced with a social science narrative in which they are a problem to be studied.

First, acknowledge that the concentration of wealth is a concern with a beefed up inheritance tax. Second, emphasize a contrasting agenda that will reward growth, saving and investment, not punish these things, the way Piketty would. Support progressive consumption taxes not a tax on capital. Third, emphasize that the historically proven way to reduce inequality is lifting people from the bottom with human capital reform, not pushing down the top.

[A]fter Pearl Harbor, in the first six months of 1942, the War Department entered orders of $100 billion... The economy roared back to life. Much of the investment capital was public. The economy did an end run around flaccid private finance, which had distributive as well as Keynesian consequences. It turned out that you did not need to give private capital exorbitant rewards for the economy to prosper. Indeed, the era of the postwar boom was one in which the rentier class suffered. The real return on capital was negative: Inflation reduced the value of bonds, and the stock market languished. Yet thanks to low capital costs, the economy thrived. Might there be a lesson here?

Capital and a Little Help from My Friends

Over at Forbes, Jean Case argues you can create value by investing with your values, and says that more folks are joining the movement:

Just imagine the possibilities if more private investment money, working alongside philanthropy, could be directed at social challenges … To innovate, to find new ways to solve old problems, we must invite business in. We need their entrepreneurial spirit, and we need their expertise on matters of scale and efficiencies. At a time when our country faces such urgent needs, we can’t afford to leave capital and talent sitting on the sidelines.

Walmart’s employees qualify for these government benefits because even though they are employed, some of them full-time, Walmart does not pay them enough to live above the poverty line... When Dr. Marco Clark speaks of the futures of our children, it’s worth considering if the business model of Walmart has anything to do with their futures being imperiled. After all, the neighbor who comes with his garden hose to put out the fire in my house is no hero if he is the one who set my house on fire or if his failure to support the local fire company is the reason it can no longer respond. Charity is not an inoculation against criticism, though it is so often used that way.

You also may want to check out this update from our blog earlier this week, featuring updates from the Nonprofit Finance Fund and the Rockefeller Foundation.

Living in Nowhere Land

The NYT's Shaila Dewan reports on how the "developed world’s wealthiest cities are facing housing crises so acute that not only low-income workers, but also the middle and creative classes, find them increasingly difficult places to afford":

More people are moving to cities, and wealth is distributed more unequally. Apartments have become a global commodity, a safe investment for the well heeled, no matter where they actually live. Todd Sinai, a Wharton economist, says that just as cities have always had fashionable neighborhoods where only wealthy people can afford to live, now some “superstar cities” have become just like those places, the affluent districts of the globe. When housing is worth so much on the open market, it becomes harder to hold some of it back for regular workers. And eventually, Sinai says, the rich could find themselves displaced as well — by those who are even richer.

You may also want to read this New York Times article, in which John Hurdle reports on the success of Philadelphia's Project HOME and on family's donation of $30 million to ending homelessness.

Click here for more issues of “In Case You Missed It”, our weekly news digest featuring the best thinking on the economy, poverty, inequality and investing, or subscribe to the email.

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Author

Toni Johnson, Vice President, Knowledge & Influence

Toni Johnson joined Heron in January of 2013 and is tasked with designing and implementing the foundation’s long-term public influence and engagement strategy. She is a former deputy editor and staff writer for the Emmy-winning website of the Council on ...